Somehow, I noticed that many crypto beginners don’t understand the basics of candlestick analysis. Honestly, this is critically important if you want to read charts like a professional.

Let’s start with the basics. Japanese candlesticks are simply the most popular way to display price movement. The wide part of the candlestick, called the body, shows the range between the opening and closing prices over a certain period. If the price closed lower than it opened, the body is red. If higher, it’s green. The thin lines above and below the body (shadows) show extreme prices. The higher the timeframe you look at, the more reliable the candlestick patterns become.

Now for the interesting part. Wolves are candlesticks with a small body that form within a narrow trading corridor. They show market indecision. Dojis are even more interesting. This is a candlestick where the open and close are almost at the same level—the entire candlestick is basically just a shadow. Dojis often signal a possible trend reversal.

Hammer and hanging man are among the most popular reversal patterns. Interestingly, the same shape can mean different things depending on the context. In a downtrend, this candlestick is called a hammer (a bullish signal); in an uptrend, it’s called a hanging man (a bearish signal). Recognizing them is simple: the body is at the top, the lower shadow is twice as long as the body, and the upper shadow is absent or very short.

Engulfing is a two-candlestick pattern with two contrasting colors—one of the most important reversal signals. The second candlestick should engulf the first. The strength of the signal increases if the first candlestick is very short and the second is long, or if the engulfing occurs after a prolonged trend with high volume.

Dark cloud cover is two days after a rally. On the first day, there is a strong green body. On the second day, the price opens above the previous day’s high, but closes near the low of the green candlestick. The lower the close, the higher the likelihood of a reversal. The opposite pattern is Morning Star, which signals a reversal at the bottom.

Star is a candlestick with a small body that forms a gap away from the previous candlestick with a large body. The Morning Star appears at the bottom (three candlesticks: a long red, a small body with a gap, then a green one that overlaps the red). The Evening Star is its bearish counterpart at the top. The doji star is a doji with a gap, which often precedes a reversal. The strongest signal is Abandoned Baby, when the doji has gaps both before and after without overlapping the shadows.

Shooting star has a small body at the bottom and a long upper shadow—it warns of a possible end to the uptrend. The inverted hammer looks similar, but it’s a bullish signal at the bottom. Harami is a small body inside the previous long candlestick, showing a pause in the trend. Harami cross (when instead of a small candlestick a doji appears) is one of the strongest reversal signals.

Piercing by the belt is a long candlestick that opens at the previous day’s low and moves upward (bullish) or downward (bearish). Two crows are two red days with a gap between them—a bearish pattern. Three black crows are a sequence of three consecutive red candlesticks with closes near their lows.

Of course, candlestick analysis is not magic—it requires practice. Combine these patterns with support-resistance levels, volumes, and the trend context. The better you understand candlestick formations, the more accurately you’ll read the market. If this interests you, I recommend practicing on charts and gradually developing your technical analysis skills.